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Get Rid of your Money Hangover

Sick personGet Rid of your Money Hangover

The party is over and it is time to take stock of the financial damage done by holiday excesses. If you are feeling as though you have a money hangover, here is what to do so you can get back in control of your finances.

  1. Face the reality of your position. Make a list of all your assets (house, car, KiwiSaver and other investments) and your debts. The difference between your total assets and your total debts is your net worth. If you are managing your money well this figure should be higher than it is was at this time last year.
  2. Find out where your money goes. Go through the last three months of bank and credit card statements. Put the transactions into three categories: financial commitments (such as rent, mortgage, insurance), discretionary spending (eating out, entertainment, gifts and other non-essential items) and essential spending (food, transport etc). Look in particular at how much you are spending on non-essential items.
  3. Start saving. Decide how much you want to save each payday and set up an automatic transfer into a savings account for this amount on your pay day. Allocate your remaining income into each of the three categories above and set up a bank account for each one.
  4. Make good choices with your savings. Use your savings to progressively do the following:
  • pay off high interest short term debt
  • set up an emergency fund
  • save for short term goals such as holidays and home renovations.

 

Feeling a bit overwhelmed by what needs to be done? If nothing else, set up an automatic transfer to save a small amount each payday, even if it is only $10. Gradually increase the amount throughout the year and you will be surprised how it mounts up.

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Get Rid of Debt in Five Easy Steps

Get Rid of Debt

Starting the New Year with a pile of debt is not a good situation to be in, but it is a common problem. If you are serious about getting ahead financially, then getting rid of debt should be one of your top priorities. Here are five steps that will help you get rid of debt faster:

Step One – Don’t add to the debts you already have. Debt arises when you spend more than you earn. You can avoid adding to your debts by living within your means.

Step Two – Confront your debts by making a list of them. If you have many small debts you might be surprised at what they add up to. Rank your debts in order of priority for payment. Some people prefer to pay off the debts with the highest interest rate first, and some prefer to start by getting rid of the debts that have the shortest repayment period so they feel like they are making progress.

Step Three – Check on any penalties or fees for early repayment. Contact each lender to determine how quickly you can repay your debt without incurring penalties or fees.

Step Four – Consolidate and/or  refinance. Look at options for consolidating your debt and/or refinancing it at a lower interest rate than you are currently paying. If you are struggling to keep up with payments, this may also allow you to repay debts over a slightly longer period of time to make the payments more manageable.

Step Five – Set up an automatic payment to make additional voluntary payments on the first debt on your list. Leave your other debt payments at their minimum level. When the first debt is paid off, start on the next one on the list and keep working through until all debts are repaid.

 

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